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India’s Foreign Trade Policy will lead the Global Economic Order – IMPRI Impact and Policy Research Institute

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India’s Foreign Trade Policy will lead the Global Economic Order - IMPRI Impact and Policy Research Institute

Harsh V Pant

India’s desire to reconfigure the global balance of power is predicated on its ability to become an indispensable element in the global economic order. Thus, it is not surprising that the new foreign trade policy seems to shed the reticence of the past

Even as the global economic order continues to face multiple challenges that show no signs of abating anytime soon, the Indian economy has shown great resilience. It has come out of the Covid-19 pandemic in much better shape than most other big economies and its growth trajectory has maintained an upward trend despite problems emanating on the geopolitical and geo-economic front virtually on a regular basis. As the IMF has suggested, India continues to remain a relative “bright spot” in the world economy with the Indian economy alone contributing 15% of the global growth in 2023.

A number of factors such as effective digitization as well as prudent fiscal policy and significant financing for capital investments have been key to India’s success in not only helping the economy revive post pandemic crisis but also in sustaining its growth momentum amidst global doom and gloom.

Against this backdrop, the Modi government has unveiled the new foreign trade policy (FTP) which aims to increase the country’s exports to $2 trillion by 2030. Unlike past such policies, it has no specific end date, with the option of revising it as and when needed. It replaces the previous FTP which ended in 2020 but because of Covid-19, the new policy got delayed. And as the world economy struggles with recessionary trends, India, with its new policy, is signaling a new commitment and ambition to emerge as a critical node in the global economic order.

Geopolitically, major world powers are divided and the fault-lines between them widen daily. Great power polarization is the new reality that all states in the international system today have to respond to. China’s aggression around its periphery and Russian invasion of Ukraine has shrunk the space for the developing world to pursue their developmental agenda. And in the geo-economic realm, the post-Cold War consensus on the fundamentals of the global economic order is fast unravelling.

Trade and technology cooperation to build political trust is giving way to trust based trade and technology partnerships. Those very nations that led the debate on the economic globalization are turning away from it in unprecedented ways.

Even as challenges mount for the global order on several fronts, it is being viewed as India’s moment and Indian policymakers are trying to ensure that India does not miss the bus this time in carving a unique place for itself in the global political and economic order.

For India, keeping the focus on domestic consolidation is key to its global rise. Ensuring that India emerges as a critical vector in the global trade matrix, therefore, should be a priority and that is reflected in the new trade policy as it seeks to further digitization and streamlining of procedures for exporters, boost e-commerce exports, make adequate provisions for MSMEs, and enhance India’s ability to undertake rupee-trade with other nations.

India’s exports reached a historic high of $750 billion this year from $500 billion in 2020–2021, though the country’s share of the international trade market is still relatively minuscule at $32 trillion. It is therefore essential that New Delhi keeps on working towards a dynamic foreign trade policy that manages to respond to India’s growing aspirations as well as the new geo-economic landscape.

Harsh V Pant

It is India’s economic rise that has shaped the trajectory of Indian foreign policy over the last three decades. Indian policymakers have been forced to respond to their nation’s political and economic rise and reshape its foreign policy accordingly. India’s economic transformation has put the nation at the center of the emerging global order, plunging it willy-nilly into the realm of great power politics. And today, India seems poised to be at the threshold of achieving the status of a major global power, emerging as an indispensable element of the new global order—exemplified by its growing economic and military might. Indian democracy became so much more attractive after the Indian economy started delivering strong results.

India’s economic is already changing global strategic equations and is having a profound impact on the emerging balance of power. If, today, India is capable of arguing that it wants to be a “leading player” in the global order—a rule-maker, not merely a rule-taker—it is the result of the confidence that the Indian economic story is alive and well. India can play the role of a responsible global stakeholder today largely because its economic capabilities allow for that possibility.

As the global order evolves into a more competitive phase with major powers openly competing, global institutions largely becoming dysfunctional and economic globalization facing fragmentation, India stands at the center of most of these debates. And the world listens to India because a democratic India trying to move towards an ambitious target of a $5 trillion economy is a story well worth believing in and nurturing. Indian policymakers can be aspirational to this degree today only by unleashing the latent energies of a populace circumscribed by decades of regressive economic policies.

India’s desire to reconfigure the global balance of power is predicated on its ability to become an indispensable element in the global economic order. It is not surprising, therefore, that it is shedding the reticence of the past in its economic engagements with the world. That’s the message that comes out of the new foreign trade policy and hopefully it will provide enough ballast to India’s trading community to achieve the ambitious targets before time.

First published in Financial Express on April 4, 2023 as An ambitious trade agenda for a global India

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